Maintain BUY, Target Price S$1.50 maintained.

Mapletree Logistics Trust (MLT) is back on the acquisition path. After its recent announcement to acquire a portfolio of modern logistics properties in Singapore, we remain excited on MLT’s growth prospects.

Where We Differ: Market is not according MLT the right valuation.

Our Target Price of S$1.50 is above consensus average of S$1.35. We believe that the street has not accounted for the improved fundamentals post acquisition and potential to surprise on the upside organically and through more acquisitions.

MLT, through its focus in key markets of Hong Kong, Singapore, Japan and Australia, offers stronger income visibility and growth than before.

Estimates raised to factor in acquisitions.

We have assumed S$300m of acquisitions by end of FY20, funded 50% by equity, which we believe consensus have not priced in yet.

Opportunities will likely come from its Sponsor which has an extensive pipeline of acquisition opportunities.

Valuation:

We maintain our BUY call with Target Price of S$1.50. Our Target Price is derived based on an assumed 3.0% risk free and 50bps higher funding costs than current.

Key Risks to Our View:

WHAT’S NEW - Building a strong base

An active year for the REIT.

The year 2018 is turning out to be a watershed year for Mapletree Logistics Trust (MLT) closed an estimated S$1.56bn in new acquisitions, raising S$0.5bn in the process. Mapletree Logistics Trust’s acquisition strategy has been to target its existing markets, deepening its exposures in the process.

Most recently, Mapletree Logistics Trust acquired 3 logistics properties for a collective S$191.6m, implying a blended yield of 6.3%. The properties are located in their existing markets of Vietnam, Korea and Australia respectively. These acquisitions are expected to be funded by debt, bringing its gearing up to close to 38.5% by the end of this quarter, which is optimal in our view.

Looking ahead, Mapletree Logistics Trust is projected to deliver a 2-3% growth in DPU driven mainly from acquisitions, while its organic growth profile continue to see improved stability on the back of its dissipating supply risk from its key market in Singapore.

Estimated adjusted for new acquisitions.

We have updated our estimates for the recently announced acquisitions. At current price, the stock offers an attractive yield of c.6.3%. In addition, we have assumed S$300m of acquisitions by end of FY20, funded 50% by equity, lifting DPUs further in the medium term.

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